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Action Alert No. 05-26
June 30, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, July 6, 2005, 9:00 a.m.
- Derivative
disclosures. The Board will discuss the scope of the project and
whether the disclosure guidance should be limited to derivatives
accounted for under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, or expanded to include all
financial instruments. (Estimated 30-minute discussion.)
- Interpretation
of paragraphs 40(b) and 40(c) of Statement 140. The Board will
discuss whether to approve the issuance of a proposed FASB Staff
Position (FSP) that would clarify that the accounting guidance provided
in paragraphs 40(b) and 40(c) of FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, relative to the notional amount of passive derivative
instruments held by qualifying special-purpose entities (SPEs) is
required to be met upon initial establishment of the qualifying SPE
only. (Estimated 30-minute discussion.)
- Open discussion. If necessary, the Board will allow time to
discuss minor issues with staff members on technical projects or
administrative matters. Those discussions are held following regular
Board meetings as topics come up.
OPEN EDUCATION SESSION
Wednesday, July 6, 2005, following the Board meeting
The Board will hold an educational, non-decision-making session to
discuss topics that are anticipated to be discussed at the July 13, 2005
Board meeting. Those topics will be posted to the FASB calendar four
days prior to the education session.
BOARD ACTIONS
The Board Actions are provided for the information and convenience
of constituents who want to follow the Board’s deliberations. All of the
conclusions reported are tentative and may be changed at future Board
meetings. Decisions are included in an Exposure Draft for formal comment
only after a formal written ballot. Decisions in an Exposure Draft may be
(and often are) changed in redeliberations based on information provided
to the Board in comment letters, at public roundtable discussions, and
through other communication channels. Decisions become final only after a
formal written ballot to issue a final Statement or
Interpretation.
June 22, 2005 Board Meeting
Conceptual
framework. The Board continued its deliberations on the joint
IASB/FASB conceptual framework project. The Board discussed issues
relating to qualitative characteristics of accounting information,
including the existing characteristics of comparability and
understandability, and potential new characteristics. The Board reached
the following conclusions:
- Comparability is an important characteristic of
decision-useful financial information and should be included in the
converged conceptual framework. Comparability—which enables users to
identify similarities in and differences between economic
phenomena—should be distinguished from consistency—the consistent use of
accounting methods. Concerns about comparability or consistency should
not preclude reporting information that is of greater relevance, or that
more faithfully represents the economic phenomena it purports to
represent. If such concerns arise, disclosures can help to compensate
for lessened comparability or consistency.
- Understandability also is an essential characteristic of
decision-useful financial information and should be included in the
converged conceptual framework. Information is made more understandable
by aggregating, classifying, characterizing, and presenting it clearly
and concisely. Whether reported information is sufficiently
understandable depends on who is using it. The information in
general-purpose external financial reports should be understandable to
financial statement users who have a reasonable knowledge of business
and economic activities and accounting and a willingness to study the
information with reasonable diligence. Relevant information should not
be excluded because it is too complex or difficult for some users to
understand.
- Materiality relates not only to relevance, but also to
faithful representation. Materiality should be included in the converged
framework as a screen or filter to determine whether information is
sufficiently significant to influence the decisions of users in the
context of the entity, rather than as a qualitative characteristic of
decision-useful financial information.
- Transparency, often cited recently as a desirable
characteristic of financial information, seems to be difficult to
define. In current usage, it appears to encompass some of the
qualitative characteristics already included in the framework. Because
it would be redundant, transparency should not be added to the converged
framework as a separate qualitative characteristic of decision-useful
financial information.
- Other possible characteristics considered, including credibility,
high quality and internal consistency, do not describe attributes of
decision-useful financial information that are distinct from other
qualitative characteristics. Thus, they should not be added as separate
qualitative characteristics in the converged framework.
- The converged framework should include information about the types
of costs that should be considered in deciding what financial
information to provide, as well as criteria to help standard setters
decide how to take particular types of costs into account.
- The converged framework should include presumptions not only about
the capabilities of financial statement users but also about the
capabilities of financial statement preparers and auditors.
The IASB separately discussed the same issues and reached similar
conclusions. The Boards plan to discuss how the qualitative
characteristics relate to one another at meetings in July.
FASB DOCUMENTS AVAILABLE
The following documents are available on the FASB website:
FASB Exposure
Draft, Business Combinations, was issued on June 30, 2005.
Comments are requested by October 28, 2005.
FASB Exposure
Draft, Consolidated Financial Statements, Including Accounting
and Reporting of Noncontrolling Interests in Subsidiaries, was issued
on June 30, 2005. Comments are requested by October 28, 2005.
Final FSP
FAS 150-5, “Issuers Accounting under FASB Statement No. 150 for
Freestanding Warrants and Other Similar Instruments on Shares That Are
Redeemable,” was issued on June 29, 2005.
Proposed FSP
FAS 123(R)-a, “Classification of Freestanding Financial
Instruments Originally Issued as Employee Compensation,” was issued on
June 28, 2005. Comments are requested by July 29, 2005.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
August. Because schedules may change, please check the FASB calendar before
finalizing your plans. Revisions to this list since the last issue of
Action Alert are highlighted in bold.
Wednesday, July 13, 2005—FASB Board Meeting
Wednesday, July 13,
2005—FASB Education Session
Wednesday, July 20, 2005—FASB Board
Meeting
Wednesday, July 20, 2005—FASB Education Session
Monday, July
25, 2005—Liaison Meeting with the Edison Electric Institute
Wednesday,
July 27, 2005—FASB Board Meeting
Wednesday, July 27, 2005—FASB
Education Session
Wednesday, August 3, 2005—FASB Board
Meeting
Wednesday, August 3, 2005—FASB Education Session
Friday,
August 5, 2005—Liaison Meeting with Financial Managers
Society
Wednesday, August 10, 2005—No FASB Board Meeting
Wednesday,
August 10, 2005—FASB Education Session
Wednesday, August 17, 2005—FASB
Board Meeting
Wednesday, August 17, 2005—FASB Education
Session
Wednesday, August 24, 2005—FASB Board Meeting
Wednesday,
August 24, 2005—FASB Education Session
Wednesday, August 31, 2005—FASB
Board Meeting
Wednesday, August 31, 2005—FASB Education
Session
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